UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-8162
------
ACCEL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0788334
----------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 METRO PLACE NORTH, SUITE 100, DUBLIN, OHIO 43017
- ----------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
614-764-7000
-----------------------------
(Registrant's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of each class
COMMON STOCK, $.10 PAR VALUE
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-Q or any amendment to this
Form 10-Q.
-----
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of October 31, 1997, there were 8,622,742 shares of Common Stock, $.10 par
value per Share outstanding. ---------
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
September 30, 1997
INDEX
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements Page
Unaudited Consolidated Balance Sheets
(September 30, 1997 and December 31, 1996) 1 - 2
Unaudited Consolidated Statements of Operations
(Nine months ended September 30, 1997 and 1996) 3
Unaudited Consolidated Statements of Common Stockholders'
Equity (Nine months ended September 30, 1997 and year
ended December 31, 1996) 4
Unaudited Consolidated Statements of Cash Flows
(Nine months ended September 30, 1997 and 1996) 5
Notes to Unaudited Consolidated Financial Statements 6 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 15
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signature 16
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Thousands of dollars)
<S> <C> <C>
ASSETS
Investments:
Investments available for sale, at fair value:
Fixed maturities (cost: 1997--$49,862,000;
1996--$58,889,000) $ 49,796 $ 58,281
Equity securities (cost: 1997--$6,124,000;
1996--$5,514,000) 6,126 5,511
Short-term investments
(cost: 1997--$19,925,000; 1996--$10,670,000) 19,958 10,703
Other invested assets, at cost
(fair value: 1997--$306,000; 1996--$346,000) 306 346
-------- --------
76,186 74,841
Cash 1,113 3,331
Receivables:
Premiums in process of transmittal, less
allowance (1997--$258,000; 1996--$223,000) 10,355 7,286
Amounts due from reinsurers,
less allowance (1997 and 1996--$125,000) 28,362 11,138
Recoverable federal income taxes 129 1,019
-------- --------
38,846 19,443
Accrued investment income 644 652
Prepaid reinsurance premiums 19,448 15,036
Reinsurance premium deposits 26,710 42,615
Deferred policy acquisition costs 30,362 30,946
Equipment--at cost, less accumulated
depreciation (1997--$200,000; 1996--$162,000) 662 231
Leasehold improvements, less accumulated amortization
(1997--$40,000; 1996--$26,000) 138 152
Other assets:
Cost in excess of fair value of net assets of
subsidiaries at dates of acquisition ($4,448,000)
less accumulated amortization 657 716
Funds held under reinsurance agreements 6,036 406
Other 729 939
-------- --------
7,422 2,061
-------- --------
$201,531 $189,308
======== ========
</TABLE>
(Continued)
1
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS--(CONTINUED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Thousands of dollars)
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Policy reserves and liabilities:
Unearned premium reserves $ 83,980 $ 81,820
Insurance claims 26,884 25,256
Other 5 7
-------- --------
110,869 107,083
Other liabilities:
Funds held under reinsurance agreements 2,940 2,920
Deferred reinsurance commissions 14,537 13,902
Amounts due reinsurers 12,625 6,133
Notes payable 15,000 15,000
Commissions payable 5,550 5,163
Accounts payable and other liabilities 2,655 2,788
Federal income taxes:
Current - -
Deferred 4,089 4,678
-------- --------
57,396 50,584
-------- --------
168,265 157,667
-------- --------
Redeemable preferred stock:
Authorized shares--1,000,000;
no issued or outstanding shares - -
Common stockholders' equity:
Common stock, $.10 par value
Authorized shares (1997 and 1996--15,000,000)
Issued shares (1997--9,406,162; 1996--9,401,162) 941 940
Additional paid-in capital 32,520 32,507
Retained earnings 6,435 5,403
Less 797,420 treasury shares at cost (6,599) (6,599)
ESOP loan - (32)
Net unrealized depreciation on investment
securities (31) (578)
-------- --------
33,266 31,641
-------- --------
$ 201,531 $ 189,308
========== ==========
<FN>
See notes to unaudited consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
REVENUE:
Gross premiums written $ 17,029 $ 15,288 $ 49,574 $ 49,152
Less reinsurance ceded 6,117 3,185 16,255 12,439
------------ ------------- ------------- -------------
Net premiums written 10,912 12,103 33,319 36,713
Decrease (increase) in unearned
premium reserves 949 1,074 1,700 (1,974)
------------ ------------- ------------- -------------
Premiums earned 11,861 13,177 35,019 34,739
Net investment income:
Interest and dividends 1,074 1,218 3,405 3,277
Realized gains (losses) 16 (48) 81 227
Service fees on extended service
contracts 822 662 2,339 1,885
Other income 81 1,439 231 1,711
------------ ------------- ------------- -------------
13,854 16,448 41,075 41,839
------------ ------------- ------------- -------------
BENEFITS AND EXPENSES:
Policy benefits 6,118 7,429 18,360 18,114
Commissions and selling expenses 5,240 5,556 16,438 17,611
Reinsurance expense recovery (1,160) (344) (4,043) (1,963)
General and administrative 2,236 1,950 6,050 5,309
Taxes, licenses and fees 480 689 1,570 1,560
Interest 356 489 1,069 1,577
Decrease (increase) in deferred policy
acquisition costs 180 305 584 (795)
------------ ------------- ------------- -------------
13,450 16,074 40,028 41,413
------------ ------------- ------------- -------------
INCOME BEFORE FEDERAL INCOME
TAXES AND EXTRAORDINARY ITEM 404 374 1,047 426
Federal income taxes:
Current expense 118 582 604 1,095
Deferred benefit (143) (237) (589) (790)
------------ ------------- ------------- -------------
(25) 345 15 305
------------ ------------- ------------- -------------
INCOME BEFORE EXTRAORDINARY
ITEM $ 429 $ 29 $ 1,032 $ 121
Extraordinary item--gain on
extinguishment of debt--Note B - 131 - 131
------------ ------------- ------------- -------------
NET INCOME $ 429 $ 160 $ 1,032 $ 252
============ ============= ============= =============
Per Common Share:
Net income $ 0.05 $ 0.03 $ 0.12 $ 0.05
============ ============= ============= =============
Weighted average number of common
shares outstanding 8,604,557 6,029,561 8,604,017 4,998,048
============ ============= ============= =============
<FN>
See notes to unaudited consolidated financial statements
</FN>
</TABLE>
3
<PAGE>
<TABLE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
<CAPTION>
Net
unrealized
Additional Common depreciation
Common paid-in Retained stock held in on investment
stock capital earnings treasury ESOP loan securities Net
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $ 524 $ 23,702 $ 3,299 $ (6,599) $ (161) $ (205) $ 20,560
Payments on ESOP loan - - - - 129 - 129
Change in net unrealized
depreciation on
investment securities - - - - - (373) (373)
Issuance of 110,000 shares of
Common Stock under
Common Stock Option Plan 11 223 - - - - 234
Issuance of 4,047,310 shares of
Common Stock in conjuction
with the Rights Offering and
the Supplemental Offering 405 8,582 - - - - 8,987
Net income - - 2,104 - - - 2,104
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balances at December 31, 1996 940 32,507 5,403 (6,599) (32) (578) 31,641
Payments on ESOP loan - - - - 32 - 32
Change in net unrealized
depreciation on
investment securities - - - - - 547 547
Issuance of 5,000 shares of
Common Stock under
Common Stock Option Plan 1 13 - - - - 14
Net income - - 1,032 - - - 1,032
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balances at September 30, 1997 $ 941 $ 32,520 $ 6,435 $ (6,599) $ - $ (31) $ 33,266
========== ========== ========== ========== ========== ========== ==========
<FN>
See notes to unaudited consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
------------- -------------
(Thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,032 $ 121
Adjustments to reconcile net income to net
cash used in operating activities:
Change in premiums receivable (3,104) (8,667)
Change in accrued investment income 8 (22)
Change in prepaid reinsurance premiums (4,412) (2,157)
Change in funds held under reinsurance
agreements (5,610) (3,066)
Change in unearned premium reserves 2,160 5,365
Change in insurance claim reserves 1,628 1,052
Change in amounts due reinsurers
and amounts due from reinsurers (10,732) (21,088)
Change in other assets, other liabilities
and accrued income taxes 928 206
Interest paid in kind - 403
Accrual of discount on bonds (175) (179)
Amortization of premium on bonds 80 77
Amortization of deferred policy acquisition
costs 15,190 15,537
Policy acquisition costs deferred (14,606) (16,330)
Reinsurance commissions earned (10,973) (16,846)
Reinsurance commissions received 11,608 19,688
Provision for depreciation and amortization 198 225
Net realized gains on investments (81) (227)
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES
EXCLUDING EXTRAORDINARY ITEM (16,861) (25,908)
Extraordinary Item - 131
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (16,861) (25,777)
INVESTING ACTIVITIES:
Sale of investments available for sale 23,605 9,566
Purchase of investments available for sale (24,357) (21,739)
Sale of property occupied by the Company - 3,298
Other, net (556) (350)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (1,308) (9,225)
FINANCING ACTIVITIES:
Payment on ESOP loan 32 112
Repayment of notes payable - (731)
Issuance of Common Stock under Stock Option Plan 14 257
Issuance of Common Stock under Rights Offering - 3,263
Change in reinsurance premium deposits 15,905 26,452
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,951 29,353
------------- -------------
NET DECREASE IN CASH (2,218) (5,649)
Cash at beginning of year 3,331 5,039
------------- -------------
CASH (OVERDRAFT) AT END OF PERIOD $ 1,113 $ (610)
============= =============
Supplemental schedule of non-cash financing activities:
cancellation of Subordinated Notes as
consideration for the purchase of
Common Stock--Note B - 5,703
============= =============
<FN>
See notes to unaudited consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited consolidated financial
statements of ACCEL International Corporation ("ACCEL") and subsidiaries
(collectively referred to herein as the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X which, as to the insurance company subsidiaries, differ in some respects
from statutory accounting practices prescribed or permitted by state insurance
departments. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for all
periods presented are not necessarily indicative of the results that may be
expected for the full year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
Principles of Consolidation: The accompanying unaudited consolidated financial
statements include the accounts of ACCEL and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in the
unaudited consolidated financial statements.
Description of Business: ACCEL is an insurance holding company incorporated in
Delaware in June 1978 as the successor to an Ohio corporation, formerly
Acceleration Corporation, organized in 1969. The Company has been engaged in the
sale and underwriting of credit life and credit accident and health insurance,
extended service contracts, commercial auto and other specialty casualty
products. The credit insurance and extended service contract products continue
to be offered to consumers, principally through automobile dealers, financial
institutions and other business entities. The specialty casualty products are
offered through general agents. The Company is subject to competition from other
insurers throughout the states in which it writes business. The Company is also
subject to regulation by the insurance departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
Accounting Estimates: In preparing the unaudited consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the unaudited consolidated financial
statements and revenues and expenses for the reporting period. Actual results
could differ significantly from those estimates.
The most significant estimates include those used in determining deferred policy
acquisition costs and the liability for unearned premium reserves and insurance
claims. Although some variability is inherent in these estimates, management
believes the amounts provided are adequate. The estimates are continually
reviewed and adjusted as necessary. Such adjustments are generally reflected in
current operations.
Investments: The Company classifies its fixed maturity and equity securities as
available for sale, therefore these securities are carried at fair value and the
unrealized appreciation or depreciation is reported as a separate component of
common stockholders' equity after giving effect to applicable income taxes.
Short-term investments, which include U. S. Treasury securities, commercial
paper and certificates of deposit are carried at fair value which approximates
cost.
Other invested assets are carried at cost which approximates fair value.
Realized gains and losses on the disposal of investments are determined by
specific identification and are included in the unaudited consolidated
statements of operations.
6
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
When an other than temporary decline in value is recognized, the specific
investment is carried at estimated realizable value and its original book value
is reduced to reflect such impairment of the investment. Such reductions in book
value are reflected in realized investment losses for the period in which they
were written down. For mortgage backed securities, when the present value of
estimated future cash flows discounted at a risk-free rate of return is less
than the cost basis of the investment, an impairment loss is recognized by
writing the investment down to its fair value.
Deferred Policy Acquisition Costs: The costs (principally commissions and
certain expenses of policy issuance) of acquiring or renewing insurance
business, all of which vary with and are directly related to the production of
business, have been deferred. These deferred policy acquisition costs are
amortized in a manner related to the recognition of premiums earned.
Substantially all such deferred costs are amortized within a four-year period.
Anticipated investment income is considered in determining recoverability of
deferred costs.
Equipment and Depreciation: Equipment is carried at cost less accumulated
depreciation. Depreciation is provided using the straight-line method over an
estimated useful asset life of five years.
Leasehold Improvements: Leasehold improvements are carried at cost less
accumulated amortization. Amortization is provided using the straight-line
method over the term of the five year lease.
Goodwill Amortization: Cost in excess of fair value of net assets of
subsidiaries at dates of acquisition is being amortized primarily over a
thirty-five year period. It is the Company's policy to account for goodwill at
the lower of amortized cost or fair value. On an ongoing basis, management
reviews the valuation and amortization of its goodwill.
Premium Income Recognition and Unearned Premium Reserves: Unearned premium
reserves on credit life and credit accident and health insurance are calculated
primarily under the "Rule of 78's Method", which results in premium income being
recognized in decreasing proportions over the terms of the policies, which
approximates the pattern of policy benefits incurred.
Unearned premium reserves on the extended service contracts are based on the
historical emergence pattern of claims. The Company's primary liability on new
car contracts exists subsequent to the expiration of manufacturers' warranties.
This method results in premium being recognized in direct proportion to the
emergence of benefits on these contracts.
Unearned premium reserves on all other property and casualty products are
calculated on the pro rata method.
Insurance Claims: The liabilities for insurance claims are determined using
statistical analyses and represent estimates of the ultimate net cost of all
reported and unreported claims that are unpaid at year end. Considerable
variability is inherent in such estimates and actual results will likely differ
from those estimates.
Federal Income Taxes: ACCEL and its subsidiaries file a consolidated federal
income tax return. The provision for income taxes is based on income for
financial reporting purposes, after permanent differences. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under this
method, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the deferred tax
assets to the amounts expected to be realized.
Reinsurance: Reinsurance premiums ceded and reinsurance recoveries on policy
benefits incurred are deducted from the respective income and expense accounts.
Assets and liabilities related to reinsurance ceded are reported on a gross
basis. Amounts related to reinsurance contracts, where it is not reasonably
possible for the reinsurer to realize a significant loss, are recorded based on
the deposit accounting method.
7
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Deferred Reinsurance Commissions: Commissions and ceding fees received in
connection with premiums ceded are deferred and amortized in a manner related to
the recognition of premiums earned. Substantially all such commissions and
ceding fees are amortized within a four-year period. Earned ceding fees,
commissions and experience refunds are reported as reinsurance expense
recoveries in the unaudited consolidated statements of operations.
Stock Option Plans: Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted the Financial
Accounting Standards Board's (FASB) Statement No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, FASB No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in FASB No. 123 had been
applied.
Earnings Per Common Share: Net income per common share is computed using the
weighted average number of common shares outstanding during the period. The
inclusion of common stock equivalents (options) would not be dilutive.
Reclassifications: Certain amounts in the 1996 unaudited consolidated financial
statements have been reclassified to conform with the 1997 presentation.
NOTE B--NOTES PAYABLE
In 1991, ACCEL issued $5,848,000 of subordinated notes (the "Subordinated
Notes"). The Subordinated Notes had a nine-year term with no principal payable
until maturity, and bore interest at 10.125% per annum. Effective June 30, 1992,
ACCEL amended the notes to permit the issuance of additional notes for the
purpose of making interest payments, provided, however, that ACCEL could at its
option pay cash in lieu of issuing additional notes in any denomination of less
than $1,000. As a result, ACCEL issued additional notes totaling $403,000 for
the nine months ended September 30, 1996.
Of the Subordinated Notes described above, a significant portion were held by
Chase Insurance Holdings Corporation ("CIHC"), a company related through common
ownership by a stockholder and director of the Company.
On July 25, 1996, the Company commenced an offering of non-transferable rights
(the "Rights Offering") to stockholders of record as of June 18, 1996. Under the
provisions of the Rights Offering, the Company permitted CIHC and its affiliate
to tender the principal amount of their Subordinated Notes for cancellation as
consideration (in lieu of cash) for the purchase of shares of common stock
pursuant to the Rights Offering. On August 23, 1996, CIHC and its affiliate
tendered $5,619,046 principal amount of their Subordinated Notes plus an
additional $83,759 of accrued interest thereon under the terms of the Rights
Offering. At the conclusion of the offering, CIHC and its affiliate had reduced
their holding of Subordinated Notes to $0.
In a separate transaction, the Company retired $731,533 principal amount of
Subordinated Notes held by an unrelated third party for consideration of
$600,000. The Company recognized an extraordinary gain on this transaction of
$131,533 during the third quarter of 1996. No federal income tax was recognized
related to this gain due to the consolidated tax position of the Company.
The result of the two aforementioned transactions was to retire all outstanding
Subordinated Notes.
8
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE B--NOTES PAYABLE (CONTINUED)
On December 29, 1995, the Company issued senior notes (the "Senior Notes")
totaling $16,500,000 at 9.50%, maturing on April 1, 2001. The proceeds from
these notes were used to retire the loan outstanding under an existing credit
agreement and to liquidate an intercompany loan between ACCEL and an insurance
subsidiary. In addition, as of January 1, 1996, Acceleration Life Insurance
Company ("ALIC") entered into a reinsurance agreement with an unaffiliated
company to reinsure the majority of the in-force credit business. The Senior
Notes are payable to the same unaffiliated company which is a party to the
reinsurance agreement dated January 1, 1996. This agreement is structured such,
that as future profits emerge on this block of business, these profits are held
by the reinsurance company, and ultimately applied to pay interest on and to
redeem the Senior Notes. This is accomplished by the following transactions. The
reinsurance company distributes profits to ALIC as periodically agreed to by the
reinsurance company and ALIC. ALIC then, subject to the Department of Insurance
of the State of Ohio (Ohio Department) approval, dividends funds to ACCEL. ACCEL
then uses these funds to redeem a portion of the senior notes and the interest
thereon. Profits in excess of the amount required to retire the Senior Notes are
to be returned to ALIC from the reinsurer. As of December 31, 1996, $1,500,000
of the profits on this block of business were released to ALIC in the form of
the aforementioned Senior Notes. These Senior Notes were retired on September
30, 1997. These transactions resulted in a balance of $15,000,000 of Senior
Notes outstanding as of September 30, 1997 and December 31, 1996.
NOTE C--REINSURANCE
On January 1, 1996 the Company terminated its then existing quota share
reinsurance agreement and elected to recapture the liabilities subject to the
treaty. The liabilities recaptured thereunder were then available for cession
under the treaty described below. The unearned premium reserves and claim
liabilities recaptured were $29,753,000 and $8,424,000, respectively.
Concurrent with this termination, the Company entered into a reinsurance
agreement with a different unaffiliated reinsurer (which is also the buyer of
the Senior Notes discussed in Note B) to reinsure a substantial portion of the
in-force credit life and accident and health insurance business, including the
amounts recaptured. This agreement is structured in such a way that as future
profits emerge on this block of business, a substantial portion of the Company's
share of the profits will be used over the next four to five years to pay fees
and interest to the reinsurer and redeem the new Senior Notes of $16,500,000
(see Note B). In connection with this agreement, approximately $40,000,000 of
assets were transferred to the reinsurer on December 29, 1995, as agreed to by
all parties. The unearned premium reserves and liability for insurance claims
subject to cession under this treaty approximated $48,616,000 and $9,919,000,
respectively, as of January 1, 1996.
The Company also has an agreement in place which covers a substantial portion of
its credit insurance business produced in 1996 and 1997. This agreement contains
an experience adjustment computation that results in the ultimate cost of this
agreement being a stated percentage related to the business covered by the
agreement. The Company ultimately retains a substantial part of the insurance
risk, the underwriting income or loss and the investment income on net funds.
The Company determined that deposit accounting is the appropriate method of
accounting for this agreement since it is not reasonably possible for the
reinsurer to realize a significant loss from the transaction. The unaudited
consolidated financial statements have been prepared on this basis.
9
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE C--REINSURANCE (CONTINUED)
The following data summarizes certain aspects of the Company's reinsurance
activity for the periods presented.
Premiums written and earned in 1997 and 1996 are summarized as follows:
WRITTEN EARNED
------------------------------------ ------------------------------------
Period Ended September 30
Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
(Thousands of dollars)
Direct $49,070 $45,214 $15,978 $13,930 $43,950 $38,922 $15,880 $13,775
Assumed 504 3,938 1,051 1,358 3,467 4,864 1,241 2,132
Ceded 16,255 12,439 6,117 3,185 12,398 9,047 5 260 2,730
------ ------ ------- ------- ------- ------- ------- -------
Net $33,319 $36,713 $10,912 $12,103 $35,019 $34,739 $11,861 $13,177
======= ======= ======= ======== ======= ======= ======= =======
Policy benefits incurred in 1997 and 1996 are summarized as follows:
Nine Months Ended September 30 Three Months Ended September 30
1997 1996 1997 1996
(Thousands of dollars)
Direct $23,031 $15,125 $ 9,058 $ 6,321
Assumed 2,350 2,993 805 1,124
Ceded 7,021 4 3,745 16
------- ------- ------- -------
Net policy benefits $18,360 $18,114 $ 6,118 $ 7,429
======= ======= ======= =======
NOTE D--COMMITMENTS AND CONTINGENCIES
In May 1996, the Liquidation Bureau of the New York Department ("Liquidation
Bureau"), acting on behalf of the New York Property/Casualty Insurance Security
Funds (the "Guaranty Fund"), during a meeting with Company representatives
informally advised the Company that on behalf of the Guaranty Fund it intended
to seek indemnification or reimbursement from Acceleration National Insurance
Company ("ANIC") for claims paid by the Guaranty Fund to Galaxy Insurance
Company ("Galaxy", a subsidiary of the Company), insureds on policies which may
have been covered by certificates of suretyship ("Certificates") which ANIC had
issued with respect to certain Galaxy insurance policies. The Liquidation Bureau
has provided some information in response to the Company's request for
accounting data and other information with respect to the Liquidation Bureau's
analysis of the Guaranty Fund's right to indemnification; however, the Company
is not yet able to quantify the magnitude of the potential claim, if any, for
indemnification or reimbursement. The Company has taken the position that the
Guaranty Fund has no right to seek indemnification unless Galaxy insureds who
hold properly issued Certificates have executed assignments and evidences of
subrogation in accordance with the terms of the Certificates. Even if any Galaxy
insured properly made such a claim directly to ANIC, the Company has been
advised by counsel that if ANIC paid any such claim, it would have the right,
under assignment and subrogation agreements with its insureds, to assert all
rights that the insureds could have asserted to recover the loss amounts from
any other source, including the Guaranty Fund.
The Company intends to fully investigate each claim which the Liquidation
Bureau, acting on behalf of the Guaranty Fund, formally asserts is entitled to
the benefits of a Certificate to determine whether such Certificate was properly
endorsed by ANIC and issued with proper authority and if so, whether proper
agreements, assignments and evidences of subrogation have been executed. The
Company intends to vigorously defend any claims for indemnification or
reimbursement made by the Liquidation Bureau, on behalf of the Guaranty Fund,
with respect to the Certificates. Although the Company is not in a position to
estimate the magnitude of the potential claims for indemnification or
reimbursement, it does not believe that the ultimate resolution of such claims
will have a material adverse effect on the financial condition or results of
operations of the Company. . In early 1997, the Liquidation Bureau requested of
the Company's' counsel the basis for the position taken by the Company. A
written analysis supporting the Company's position was subsequently issued to
the Liquidation Bureau.
10
<PAGE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE E--SALE OF AUTO AFTER-MARKET PRODUCT GROUP
On August 13, 1997, ACCEL announced it had reached an agreement in principle
pursuant to which ACCEL would sell its auto aftermarket product group along with
the stock of its Acceleration Life Insurance Company (ALIC) subsidiary and two
other subsidiaries to Frontier Insurance Group, Inc. On October 27, 1997, ACCEL
announced it had signed definitive agreements to sell its auto after-market
product group along with the stock of Acceleration Life Insurance Company,
Dublin International Limited and Acceleration National Service Corporation to
Frontier Insurance Group, Inc. for $40.5 million in cash. The transaction is
expected to close on or about December 31, 1997 and is subject to stockholder
approval and the receipt of applicable regulatory approvals.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating Results for the Nine Months Ended
September 30, 1997 and 1996
Operating Results
The income before federal income taxes and extraordinary item for the nine
months ended September 30, 1997 was $1,047,000 compared to $426,000 for the same
period in 1996. The income before federal income taxes and extraordinary item
for the three months ended September 30, 1997 was $404,000 compared to $374,000
for the same period in 1996. The Company's three primary product lines; credit,
extended service contracts and commercial auto all produced positive
underwriting margins in the nine months of 1997. Loss ratios for these products
were at or below targeted levels.
The Company's new Property and Casualty programs continued their growth,
producing $21,468,000 of annualized premium in the nine months of 1997 compared
to $14,300,000 in the nine months of 1996. These programs, primarily Commercial
Auto, have now matured to the point where they are generating a significant
contribution to the Company's financial results.
The Company's general and administrative expenses have increased by $741,000 or
13.95% in 1997 compared to 1996. These expenses are being incurred in order to
prepare the Company to add additional product lines and to enhance current
offerings.
Revenue
Premium writings for the nine months of 1997 were $49.6 million compared to
$49.2 million for the nine months of 1996. Premiums written increased by
$1,072,000 for the extended service contract program and by $7,168,000 for the
new property and casualty programs. These increases were offset by a decrease in
credit premium written of $7,368,000. The decrease in credit premium is
attributable to the termination of a joint marketing agreement covering credit
business written in the commonwealth of Pennsylvania in July 1996 and the
Company's withdrawal from the state of Michigan in November 1996.
Liquidity and Capital Resources
The Company's cash flows from operations have generally been adequate for its
current operating needs. The Company's credit insurance policy terms and related
liabilities are generally limited to a four-year period during which the
consumer makes payments on the loan. The Company's liability on extended service
contracts typically extends for either one-year or five-year periods. The
Company's long haul trucking and charter bus business generally is written for a
term of one year with the casualty claim related liabilities extending beyond
that period. The Company, therefore, maintains liquidity in its investment
portfolio to correspond with the liabilities outstanding on its lines of
business. At September 30, 1997, the estimated duration of the Company's fixed
income investment portfolio was 2.8 years while the estimated liability duration
was approximately 3.5 years. Currently, an interest rate change of 1% would
impact the fair value of the fixed maturity portfolio and stockholders' equity
by a decline of approximately $1.9 million if interest rates rose and an
increase of approximately $1.9 million if interest rates declined.
The Company's "available for sale" fixed maturity portfolio at September 30,
1997 and 1996 includes mortgage-backed securities, collateralized mortgage
obligation securities and asset-backed collateralized securities. The mortgage
and asset-backed securities are subject to risks associated with variable
prepayments. As such, those securities may have a different actual maturity and
yield than planned at the time of purchase. The degree to which a security is
susceptible to either gains or losses is influenced by the difference between
its amortized cost and par value, relative sensitivity of the underlying
mortgages to prepayment risk in a changing interest rate environment and
relative priority of the securities in the overall securitization.
The Company limits the extent of its risks on fixed maturity securities by
generally avoiding securities whose cost significantly exceeds par, by
purchasing securities which are backed by stable collateral, and by
concentrating on securities that are either planned amortization or sequential
pay classes. The collateralized mortgage obligations and asset backed securities
owned have primarily short to intermediate average lives. At September 30, 1997,
the Company did not have a significant amount of higher risk mortgage or asset
backed securities. There are negligible default risks on the mortgage and asset
backed security portfolios as a whole as the vast majority of the assets are
either guaranteed by U. S. government-sponsored entities or are supported in the
securitization structure by junior securities enabling the assets to achieve
high investment grade status.
12
<PAGE>
Ohio domiciled insurance companies are subject to Ohio law which regulates the
ability of insurance companies to pay dividends. The regulation limits the
annual dividend or distribution of an insurer to the greater of (1) net income
of the previous year or (2) 10% of unassigned surplus as of the end of the
previous year. In addition, all dividends must come from earned surplus to
qualify as a non-extraordinary dividend. Amounts greater than this would be
considered extraordinary dividends and could not be paid without permission of
the Ohio Department. Based on this regulation, ALIC could pay a dividend of
$1,543,315 without Ohio Department approval to ACCEL in 1997 and ANIC would
require Ohio Department approval to pay any dividend to ACCEL during 1997. On
May 8, 1997, ALIC paid a cash dividend to ACCEL in the amount of $1,500,000. On
September 30, 1997, ALIC, with the approval of the Ohio Department, paid a
dividend of $1,678,125 to ACCEL. This dividend consisted of an extraordinary
portion of $1,634,810 and an ordinary portion of $43,315.
The Company will monitor its current and future debt service requirements to
coincide with cash flow availability. In 1996, the Company used a portion of the
proceeds from a Rights Offering and the payment from a judgment entered in its
favor in a legal proceeding (see Rights Offering and Discontinued Realtor's
Errors and Omissions Program under Certain Events) to repay $4,296,000 in
advances received in 1992 and 1993 from ACCEL's subsidiaries. These outstanding
advances were eliminated in consolidation.
On July 25, 1996, the Company commenced an offering of non-transferable rights
to stockholders of record as of June 18, 1996 (see Rights Offering under Certain
Events). The Rights Offering concluded on August 28, 1996 and generated
$3,261,780 in cash proceeds. A supplemental offering to employees, agents and
customers concluded on September 30, 1996 and generated $141,862 in cash
proceeds of which $113,355 had been received by the Company as of December 31,
1996. The cash proceeds from these offerings have been used to repay
intercompany advances ($2,647,000), for the redemption of Subordinated Notes
which were not tendered in the Rights Offering ($600,000) (see "Note B" in the
Notes to Unaudited Consolidated Financial Statements), and for general corporate
purposes.
Also, under the provisions of the Rights Offering, the Company permitted Chase
Insurance Holdings Corporation ("CIHC") and its affiliates to tender the
principal amount of their Subordinated Notes (See "Note B" in the Notes to
Unaudited Consolidated Financial Statements) for cancellation as consideration
(in lieu of cash) for the purchase of shares of common stock pursuant to the
Rights Offering. On August 23, 1996, CIHC and its affiliates tendered $5,619,046
principal amount of their Subordinated Notes plus an additional $83,759 of
accrued interest thereon under the terms of the Rights Offering. At the
conclusion of the offering, CIHC and its affiliate had reduced their holding of
Subordinated Notes to $0.
In a separate transaction, ACCEL retired $731,533 principal amount of
Subordinated Notes held by an unrelated third party for consideration of
$600,000. ACCEL recognized an extraordinary gain on this transaction of $131,533
during the third quarter of 1996. No federal income tax was recognized related
to this gain due to the current consolidated tax position of the Company. The
result of the two aforementioned transactions was to retire all outstanding
Subordinated Notes.
On December 29, 1995, the Company issued new senior notes (the "Senior Notes")
totaling $16,500,000 at 9.50%, maturing on April 1, 2001. The proceeds from
these notes were used to retire the loan outstanding under an existing credit
agreement (see "Note B" in the Notes to Unaudited Consolidated Financial
Statements) and to liquidate an intercompany loan between ACCEL and an insurance
company subsidiary. In addition, as of January 1, 1996, ALIC entered into a
reinsurance agreement with an unaffiliated company to reinsure its in-force
credit business. The Senior Notes are payable to the same unaffiliated company
which is a party to the reinsurance agreement dated January 1, 1996. This
agreement is structured such, that as future profits emerge on this block of
business, these profits are held by the reinsurance company, and ultimately
applied to pay interest on and to redeem the Senior Notes. This is accomplished
by the following transactions. The reinsurance company distributes profits to
ALIC as periodically agreed to by the reinsurance company and ALIC. ALIC then,
subject to Ohio Department approval, dividends funds to ACCEL. ACCEL then uses
these funds to redeem a portion of the senior notes and the interest thereon.
Profits in excess of the amount required to retire the Senior Notes are to be
returned to ALIC from the reinsurer. As of December 31, 1996, $1,500,000 of the
profits on this block of business were released to ALIC in the form of the
aforementioned Senior Notes issued by ACCEL. This release resulted in a balance
of $15,000,000 of Senior Notes outstanding as of September 30, 1997 and December
31, 1996.
ACCEL's Board of Directors approved an Employee Stock Ownership Plan ("ESOP")
during 1989. In 1990, the ESOP entered into an agreement with ALIC to borrow up
to $1,000,000 for the purchase of ACCEL's common stock. Company contributions
into the ESOP have been used to pay down the loan from ALIC and release shares
into the participants' accounts as the Company's matching contribution. The ESOP
purchased 136,887 shares (adjusted for the 1990 5% common stock dividend) under
this loan agreement with ALIC at a cost of $1,000,000. In addition to the shares
purchased under the loan agreement, the ESOP purchased 90,088 common shares at a
cost of $603,000. The loan bore interest at 10%.
13
<PAGE>
The unpaid balance of the loan has been reflected as a reduction in common
stockholders' equity in the accompanying unaudited consolidated balance sheets.
During the first quarter of 1997, ACCEL made the final payment and retired this
loan.
The Company currently has three material lines of business that are in run-off
status: the REO line, the farmowner's multi-peril and ancillary inland marine
products and the auto dealers' commercial multi-peril line.
The estimates for policy reserves are continually under review and adjusted as
necessary as experience develops or new information becomes known; such
adjustments are included in current operations. These liabilities are
necessarily subject to the impact of future changes in claim severity, frequency
and other factors. Although considerable variability is inherent in such
estimates, based on recent evaluations management believes that the current
level of policy reserves will be adequate to cover anticipated claim
liabilities. Accordingly, the ultimate amounts required for settlement of policy
benefits may vary significantly from the amounts included in the accompanying
unaudited consolidated financial statements.
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 125 - Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 125).
SFAS 125 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. The accounting and
disclosure requirements of SFAS 125 are effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996 and is to be applied prospectively. Earlier or retroactive application was
not permitted. ACCEL adopted SFAS 125 in 1997 and the impact on the unaudited
consolidated financial statements was not material.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 - Earnings per Share (SFAS 128). SFAS 128 establishes standards for
computing and presenting earnings per share (EPS). The accounting and disclosure
requirements of SFAS 128 are effective for financial statements issued for
periods ending after December 15, 1997, including interim periods and earlier
adoption is not permitted. SFAS 128 also requires restatement of all
prior-period EPS data presented. ACCEL will adopt SFAS 128 in December 1997 and
the impact on the unaudited consolidated financial statements is not expected to
be material.
Although the cumulative effects of inflation on premium growth cannot be fully
determined, increases in the retail price of automobiles have generally resulted
in increased amounts being financed which constitute the basis of premiums
charged for credit insurance. Anticipated increases in automobile repairs also
provide the primary basis for increases in extended service contract premium
rates.
Certain Events
Rights Offering: On July 25, 1996, the Company commenced a Rights Offering to
stockholders of record as of June 18, 1996. The non-transferable subscription
rights entitled stockholders of record to receive one right for each share of
stock held and each right entitled the holder thereof to purchase one and
one-half shares of the common stock of the Company at a subscription price of
$2.25 per share. The rights expired on August 28, 1996. No commission or
compensation was paid in connection with the Rights Offering. As part of the
Rights Offering, the Company permitted the outstanding Subordinated Notes held
by CIHC and its affiliates to be tendered for cancellation as consideration (in
lieu of cash) for the purchase of shares of common stock pursuant to the Rights
Offering.
A total of 3,984,260 shares were subscribed for under the Rights Offering. Total
consideration of $8,964,585 consisted of $5,702,805 in Subordinated Notes and
$3,261,780 in cash.
Subsequent to the Rights Offering, the Company commenced a Supplemental Offering
to employees, agents and customers which concluded on September 30, 1996. Shares
were offered under this Supplemental Offering at $2.25 per share. A total of
63,050 shares were subscribed for under this offering. No soliciting fees or
other compensation were paid in connection with such offering. The net cash
proceeds from these offerings have been used to repay intercompany advances
($2,647,000), for the redemption of Subordinated Notes which were not tendered
in the Rights Offering ($600,000) and for general corporate purposes.
14
<PAGE>
Claims Asserted by Liquidation Bureau under Certificates of Suretyship: On
October 7, 1994, the Liquidation Bureau of the New York Department (the
"Liquidation Bureau") took control of Galaxy pursuant to an order of liquidation
of the New York Supreme Court. Prior to the liquidation of Galaxy, ANIC had
issued certain certificates of suretyship ("Certificates") with respect to
certain Galaxy insurance policies each of which provided that ANIC would assume
the responsibilities of Galaxy under the specified policy if Galaxy became
insolvent or financially unable to meet its obligations on the underlying
policy, but only if certain conditions were met. In particular, the Certificates
provided that ANIC's assumption of liability was contingent upon the insured's
executing and delivering all agreements, assignments or evidences of subrogation
satisfactory to ANIC respecting payments made or liabilities assumed.
During 1996, the Liquidation Bureau, acting on behalf of the New York
Property/Casualty Insurance Security Funds (the "Guaranty Fund"), informally
advised the Company that on behalf of the Guaranty Fund it intended to seek
indemnification or reimbursement from ANIC for claims paid by the Guaranty Fund
to Galaxy insureds on policies which may have been covered by the Certificates.
The Liquidation Bureau has provided some information in response to the
Company's request for accounting data and other information with respect to the
Liquidation Bureau's analysis of the Guaranty Fund's right to indemnification;
however, the Company has not been able to evaluate or quantify the magnitude of
the potential claim, if any, for indemnification or reimbursement. The Company
has taken the position that the Guaranty Fund has no right to seek
indemnification unless Galaxy insureds who hold properly issued Certificates
have executed assignments and evidences of subrogation in accordance with the
terms of the Certificates. Even if any Galaxy insureds properly made such a
claim directly to ANIC, the Company has been advised by its legal counsel that
if ANIC paid any such claim, it would have the right, under assignment and
subrogation agreements with its insureds, to assert all rights that the insureds
could have asserted to recover the loss amounts from any other source, including
the Guaranty Fund. In early 1997, the Liquidation Bureau requested of the
Company's' counsel the basis for the position taken by the Company. A written
analysis supporting the Company's position was subsequently issued to the
Liquidation Bureau.
The Company intends to vigorously defend any claims for indemnification or
reimbursement made by the Liquidation Bureau, on behalf of the Guaranty Fund,
with respect to the Certificates. Although the Company is not in a position to
estimate the magnitude of the potential claims for indemnification or
reimbursement, it does not believe that the ultimate resolution of such claims
will have a material adverse effect on the financial condition or results of
operations of the Company.
Discontinued Realtors' Errors and Omissions Program: As a result of the losses
sustained in the REO program, and in particular, conduct discovered by the
Company after it assumed responsibility for claims processing and handling, the
Company filed suit in November 1991 against the non-affiliated marketing
organization and broker involved in the program.
The lawsuit sought to recover funds improperly withdrawn from the account
established for the payment of claims under the program; for damages due to
business expenses improperly charged against such funds; and for improper
administration of the program. ACCEL and ANIC entered into an arrangement
whereby ANIC's rights under the lawsuit were transferred to ACCEL in exchange
for a $4,000,000 collateral loan issued to ANIC which was recorded as a capital
contribution. The transaction and related agreements were approved by the Ohio
Department. The loan agreement and accompanying promissory note called for
interest at the 13 week Treasury Bill rate plus 100 basis points. The principal
of $4,000,000 was paid in full on December 29, 1995.
In late 1995, ACCEL was awarded $5,300,000 in damages related to this
litigation. Pursuant to settlements reached with all of the parties, ACCEL
received a total of $4,291,085 in 1996 ($140,000 in the first quarter of 1996).
With the approval of the Ohio Department, the proceeds from the settlement were
shared equally between ACCEL and ANIC. The Company requested the sharing
agreement due to the continuing losses in the REO program realized by ANIC since
1991. The Company has recorded the $140,000 recovery as "Other income" in the
accompanying unaudited consolidated statement of operations for the nine months
ended September 30, 1996.
Sale of Auto Aftermarket Product Group: On August 13, 1997, ACCEL announced it
had reached an agreement in principle pursuant to which ACCEL would sell its
auto aftermarket product group along with the stock of its Acceleration Life
Insurance Company (ALIC) subsidiary and two other subsidiaries to Frontier
Insurance Group, Inc. On October 27, 1997, ACCEL announced it had signed
definitive agreements to sell its auto after-market product group along with the
stock of Acceleration Life Insurance Company, Dublin International Limited and
Acceleration National Service Corporation to Frontier Insurance Group, Inc. for
$40.5 million in cash. The transaction is expected to close on or about December
31, 1997 and is subject to stockholder approval and the receipt of applicable
regulatory approvals.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K have been filed by the Registrant during the
quarter ended September 30, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACCEL INTERNATIONAL CORPORATION
Dated: November 13, 1997 By: /S/ Cynthia Anne Moore
------------------- ------------------------
Cynthia Anne Moore
Chief Financial Officer*
* Ms. Moore is Senior Vice President and Chief Financial Officer and has been
duly authorized to execute the report on behalf of the Registrant.
16
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from ACCEL
International Corporation's third quarter Form 10-Q and is qualified in its
entirety by reference to such form 10-Q.
</LEGEND>
<CIK> 0000001985
<NAME> ACCEL INTERNATIONAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 49,796
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 6,126
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 76,186
<CASH> 1,113
<RECOVER-REINSURE> 28,362
<DEFERRED-ACQUISITION> 30,362
<TOTAL-ASSETS> 201,531
<POLICY-LOSSES> 26,884
<UNEARNED-PREMIUMS> 83,980
<POLICY-OTHER> 5
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<NOTES-PAYABLE> 15,000
0
0
<COMMON> 941
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35,019
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<UNDERWRITING-AMORTIZATION> 21,668
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